The Value of Natural Gas in the Pacific Northwest: Demand

In today’s blog, we’ll discuss natural demand in the Pacific Northwest.

The overall demand for natural gas in the Pacific Northwest is forecast to grow at nearly the same rate as reported over the last few years: a modest 1.0 percent per year (see forecast demand growth by sector in Table 1). Natural gas as a fuel to generate electricity paces overall expected to increase in regional gas use (see Figure 2), in part due to the retirement of coal generation units in 2021-2022. Meanwhile, residential and commercial customers continue the decades-long trend of using gas more efficiently (see Figure 3), dampening growth in those sectors.

Figure 1 (below) shows how regional demand has fluctuated over the past two decades. Figure 4 shows forecast peak and average day demand. It is important to keep in mind that utilities and pipeline operators must design their systems to deliver energy on “peak” days, which are typically in the winter in the Pacific Northwest.

Unless otherwise noted, the source of charts and tables in this blog is the NWGA.

Figure 1: Historic Regional Demand by Sector (Source: EIA and Statistics Canada Consumption Tables)

NOTES: While regional residential and commercial consumption has remained relatively flat over the past decade, industrial usage has declined considerably, in part due to the “Great Recession” that cost the region more than 20 percent of its industrial gas load between 2007 and 2012. The industrial sector is still the largest regional user; however (see Figure 2).

As noted above, the region is using increasingly more natural gas to generate electricity. However, year-to-year variations occur because gas is typically used when other resources (hydro, nuclear, wind, solar) are unavailable in sufficient quantities. In other words, gas is the last generation fuel on and the first fuel off. In that way, natural gas provides a critical role in ensuring the reliability of the electricity system here as the region transitions to more renewable but intermittent resources.

Table 1: Forecast Annual and Cumulative (through 2028/2029) Demand Changes by Case

NOTES: This demand forecast is a compilation of the planning conducted by NWGA member-companies, including the integrated resource plans each natural gas utility is required to file with their respective state/provincial regulator. Low and high demand cases are driven by various economic and policy factors, including growth, commodity cost, cost of carbon, etc.

Figure 2. Expected Case Forecast by Economic Sector

NOTES: Residential, commercial, and industrial demand for natural gas is expected to grow at a slightly slower pace than forecast in last year’s Outlook, while generation demand is anticipated to grow at a slightly greater rate. The forecast step increase in gas demand for generation shown in 2021-2022 coincides with the retirement of several coal-fired generation units currently serving the region, including Boardman in Oregon (end of 2020), Centralia Boiler 1 in Washington (end of 2020), and Colstrip Units 1 & 2 in Montana (mid-2022). This forecast demonstrates the expectation that natural gas will play an increasingly important role in maintaining system reliability and affordability as policymakers drive the region toward a cleaner energy future.

Figure 3: Declining Per Capita Consumption in Residential and Commercial Sectors

NOTES: While the number of residential and commercial natural gas consumers in our region has grown 124 percent since 1990, per capita usage of natural gas has dropped 32 percent due to energy efficiency efforts, including more efficient gas appliances.

Figure 4: Peak and Average Day Demand Forecast

NOTES: The Pacific Northwest uses the least amount of gas during May. The gas used to generate electricity for air conditioning typically ramps up in June before tailing off during the fall. January is the month during which our region typically uses the most gas to heat space and water for homes and businesses.

Natural gas utilities design their systems to serve demand on the coldest day likely to occur in the territories they serve. Figure 4 illustrates that demand for natural gas on those days can nearly double the demand experienced during an average winter day. While each company approaches its planning standard a little differently, “peak” or “design,” days are typically based on actual 24-hour average temperatures recorded at representative locations.

Click here to review the data table in Appendix A of the 2020 Outlook.

The Value of Natural Gas in the Pacific Northwest: Emissions

In this week’s blog, we focus on natural gas and greenhouse gas emissions.

Gaining a better understanding of greenhouse emissions released from natural gas production and delivery systems helps clarify how the proper deployment of natural gas can deliver significant environmental benefits. Join us in taking a closer look at the numbers.

Industry-wide Natural Gas Emissions are Low and Declining

The U.S. Environmental Protection Agency (EPA) made further updates to its estimates of methane emissions in its Inventory of U.S. Greenhouse Gas (GHG) Emissions and Sinks: 1990–2018 (“Inventory”), released in April 2020. The Inventory incorporates new data available from studies on emissions as well as the EPA’s own Greenhouse Gas Reporting Program (GHGRP).

The Inventory found that industry-wide methane emissions¹ as a rate of natural gas production were 1 percent. The ratio of methane emissions per unit of natural gas produced has declined continuously during the past several decades, dropping 48 percent since 1990.

U.S. Methane Emissions per Mcf of Gas Produced ²

The inventory also confirmed that natural gas distribution systems have a small emissions footprint that continues to decline. Distribution systems emit less than 0.1 percent of produced natural gas annually, a decline of 73 percent from 1990 to 2017 even as U.S. natural gas utility companies added more than 730,000 miles of pipeline to serve 19 million more customers,
increases of 50 and 36 percent respectively, and natural gas production increased by 50 percent.

The bottom line: New control technologies, replacement of old cast iron and bare steel pipes, and better industry practices have contributed to significant emissions reductions, even as annual natural gas production and consumption have hit record highs.

U.S. Methane Emissions from Natural Gas Distribution Systems

Regionally, Emissions are Already Lower and Expected to Decline Even Faster

In the basins from which the Pacific Northwest sources most of its natural gas, policymakers and regulators have taken action to further decrease methane emissions from upstream operations. Effective January 2020 in BC, the source of about two-thirds of our region’s natural gas, the BC Oil and Gas Commission (BC OGC) has committed to reduce methane emissions from upstream oil and gas operations by 45 percent by 2025 relative to 2014 levels, targeting everything from compressor seals to storage tanks. The BC approach is expected to reduce methane emissions by 10.9 megatonnes (10.9 million metric tons) of CO2 equivalent over a 10-year period, the equivalent of taking 390,000 cars off the road each year.³ In addition, BC’s natural gas transmission sector is expected to reduce its emissions by 40 to 45 percent below 2012 levels by 2050 under the Canadian federal Methane Regulation, which also came into force in January 2020. Like the BC OGC, the federal Methane Regulation is focused on reducing emissions from fugitives and venting.

In 2014, Colorado (which provides much of our region’s Rockies’ gas, about one-third of our supply overall) approved the first methane regulations in the U.S. requiring energy companies to reduce methane emissions from oil and natural gas operations by routinely checking their oil and natural gas wells—both new and existing—statewide, and immediately addressing any leaks. The regulations go beyond those of the EPA, which apply only to new or modified operations, according to the Environmental Defense Fund, which helped craft Colorado’s regulations.

Where does the PNW get it’s natural gas?

By 2016, field surveys of oil and gas equipment by the Colorado Department of Public Health and Environment (CDPHE) found a 75 percent drop in the number of sites where methane leaks were detected compared to similar surveys conducted prior to the regulations taking effect, said Will Allison, former director of the department’s Air Pollution Control Division. By 2018, Garry Kaufman, the division’s new director, said, “Colorado’s program has reduced emissions of methane and volatile organic compounds from the oil and gas sector by hundreds of thousands of tons per year, while still allowing for growth in this important economic resource for Colorado.”

As a result, gas pipelines serving the Northwest have the lowest methane emissions on the continent and will continue to improve.

Regional Natural Gas Emissions are Small Relative to Other Sectors

Overall, direct use of natural gas for space and water heating in homes and commercial buildings in the Pacific Northwest accounts for just eight percent of total regional GHG emissions (see pie chart). The transportation sector (trucking, fleets, personal vehicles, public transit, etc.) produces the largest share of regional emissions (42 percent). The “other” category in the chart includes agriculture, forest practices, waste streams (landfills, wastewater treatment), building heat from fuels other than natural gas, oil and gas extraction (BC only), and industrial emissions not related to natural gas combustion.

Sources: BC 2017 Inventory: BC Community Energy Emissions Inventory for Residential/Commercial Combustion of Natural Gas; Oregon 2017 GHG Inventory; Washington 2017 GHG Inventory; U.S. EIA State Carbon Dioxide Emissions Data for 2017 Residential/Commercial combustion of Natural Gas in OR/WA, October 2019.

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¹Industry-wide, or “lifecycle” emissions, as defined by the EPA, include natural gas field production, processing, transmission and storage, and distribution.

²Includes methane emissions from petroleum production based on the natural gas fraction of total energy content produced from oil wells.

³For details from the BC Oil and Gas Commission, see https://www.bcogc.ca/public-zone/reducing-methane-emissions